The HMRC is set to increase the Child Benefit payment for families in the United Kingdom starting in April 2024. Currently, the benefit is valued at £26.05 per week for the first child and £17.25 for each additional child. The proposed adjustments will raise these amounts to £27 per week for the first child and £17.90 for subsequent children. This change is contingent upon Parliamentary approval following the Labour Party‘s Autumn Budget.
Eligibility for Child Benefit extends to families with children under 16, or those with children under 20 who are in full-time education or approved unpaid training. Parents can apply for this benefit after registering the birth of their child or when their child comes to live with them. Notably, the benefit can be backdated for up to three months.
Impact of Child Benefit on Families
Claiming Child Benefit can also enhance a family’s State Pension benefits. If a parent or their partner is not employed or earns less than £125 per week, claiming this benefit allows them to accumulate National Insurance credits, essential for receiving the full State Pension.
It is important to note that only one parent can claim Child Benefit for a child. In instances where both parents are responsible, it is advisable to consider which parent may benefit more from the National Insurance credits.
Families earning above £60,200 will face the High Income Child Benefit Charge, which requires them to repay a portion of their benefit. For those with an income exceeding £80,000, the entire amount must be repaid. While families with incomes above £60,000 can still claim the benefit, they will incur an additional tax based on their earnings.
Understanding Income Tax Implications
For families, it is crucial to differentiate between gross income and adjusted net income. The latter is the income that is taxed and excludes certain deductions, such as those made through salary sacrifice schemes. Parents might consider increasing their pension contributions as a strategy to lower their taxable earnings.
In summary, the planned increase in Child Benefit could provide much-needed financial support to families across the UK. As the government moves forward with the proposed changes, the impact on household budgets will be closely monitored in the coming months.
